Please or to access all these features

Add post

Watch this thread

Save thread

Start a new thread

Flip thread

Hide thread

My feed

Active Unanswered threads

Getting started FAQ's

Unanswered threads Acronyms Talk guidelines

Hide shortcut buttons

Talk

Property/DIY

Join our Property forum for renovation, DIY, and house selling advice.

Flip

Original poster

If buyer pulls out after exchange, is it easy to get the 'penalty' out of them?

23 replies

CatAndHisKit · 14/02/2021 20:14

My buyer has been messing around for months (a cash buyer investor). After 4 months of this, I said I must have an agreement to complete in March. Otherwise i''d try and find another cash / no chain buyer (didn't say that to him yet).
He's done searches but been stalling since for over a month. Estate agent thinks he's got financial issues (his company shows like being in debit online but I know that's not the full picture).

Anyway he's just asked if I'd be happy to exchange as that would give me a security of being tied into a contract. I said, yes that's great, but I still want to complete in March. To which he looked unsure. Got a feeling that he'd want to stretch it even after exchange. I can't do that (at least without having certainty) but I'm wary of searching for a new buyer.

I just wonder - when dealing with someone possibly dodgy - and he pulls out after exchange, what if he's got no money to pay the 10% penalty (or hides it from official company a/c), is it a nightmare then to claim it? Would it be through court? Or would he pay 10% on exchange and that would stay with solicitors who must release it to seller?

OP posts:

Africa2go · 14/02/2021 20:18

Normally, the buyer has to pay the deposit on exchange to your solicitor so if he's got money issues he won't be able to exchange.

Original poster

CatAndHisKit · 14/02/2021 20:35

Thanks, Afrrica. I mean what if he pays the deposit and then can't complete or doesn't honour the date?
Would my solicitor be able to just pay me the 10% by the agreed completion date, or are there loopholes / having to wait a long time to get these funds?

OP posts:

Rubyredroo · 14/02/2021 20:41

From my experience our solicitors would not allow exchange until the full amount was in their account in the event of a cash buyer even though only 10% is given on exchange.

Original poster

CatAndHisKit · 14/02/2021 21:54

Er not sure how would it work with a chain where someone is cash from proceeds, Ruby ?

OP posts:

NotDavidTennant · 14/02/2021 22:05

Everyone in the chain has to exchange at the same time. The person at the bottom of the chain pays their deposit to the next person who then uses it to pay the next person and so on.

Africa2go · 14/02/2021 22:14

It's only usually the deposit which changes hands at exchange. Your solicitor should explain it to you OP.

GU24Mum · 14/02/2021 22:53

Hi OP, are you in a chain or is it just the two of you? Same principles but a bit different in practice.

If you exchange with completion reasonably soon afterwards (ie weeks rather than months/years) it's very brave for buyers to default completely. If they don't have the money to complete on the contractual completion date then your solicitor serves a notice to complete which gives the buyer 10 working days. If he completes during that time he'll have to pay interest and possibly some other bits and pieces on top of the rest of the completion monies. If he can't complete before the. price expires then the contract is rescinded and you can keep his deposit. If he hasn't paid a full 10% you have a contractual right to claim the balance but would most likely be wasting your time doing that.

Much more involved in a chain as if your buyer defaults then you can't complete on your purchase if they are related.

GU24Mum · 14/02/2021 22:54

I should have said that that's England and Wales, not Scotland.

titchy · 14/02/2021 23:00

Ask your solicitor. If his company is in debt I'd want to know that in the event of him or his company declaring bankruptcy between exchange and completion the receivers couldn't somehow get the deposit back. I think I'd also be asking for a much higher deposit than the standard 10%.

HeronLanyon · 14/02/2021 23:04

ruby what ? Cash buyer has to actually hand over 100% at échange even though only 10% is going to seller ?? I can see solicitor would want to see you’re good for it but that seems odd. Maybe ive misunderstood.

Original poster

CatAndHisKit · 15/02/2021 01:29

Africa I know this, it was another poster saying it would the the whole amount for cash buyers. I was asking originally about the certainty of getting the deposit if buyer can't complete.

GU24 thank you for explaining the process in detail. It's just the two sides currrently. Could you confirm that the deposit would be with my solicitor and they couldn't stop it beng paid out in case of him closing his company suddenly (or a similar move)? He's got two co's registered and one was dissolved jst before the new one opened in autumn. I don't know if fthat was him avoiding payments.

titchy exactly what i'm worried about - insolvency or company dissolved. See my response to GU just above, about his strange dealings. Agent also told me he is known to be flaky with their other branch. I just want security if he does offer exchange with completion a month off or similar. I would agree to this if I knew 100% I will get the deposit that is held by solicitors. I will ask her, but don't want to pre-empty before I hear from him, and ir's all by email currently. I wanted to ask here so I can decide on course of action (possibly tomorrow).

OP posts:

Sunflowergirl1 · 15/02/2021 07:02

You normally set the completion date in exchange otherwise you are tied into a never ending contract

loveisagirlnameddaisy · 15/02/2021 07:36

@CatAndHisKit

Africa I know this, it was another poster saying it would the the whole amount for cash buyers. I was asking originally about the certainty of getting the deposit if buyer can't complete.

As far as I know, the 10% deposit would be cleared funds in your solicitor's bank account on the day of exchange. If buyer fails to complete according to date specified in contract, they forfeit that money.

Exchange is short for exchange of contracts, so in law, after exchange, the buyer is contractually obliged to honour the terms of the contract. Ensure a specific completion date is written into the contract and you'll be ok. This is pretty basic conveyancing and your solicitor should be able to reassure you.

loveisagirlnameddaisy · 15/02/2021 07:38

And if it's cleared funds, the buyer wouldn't be able to get a refund should the company buying the property or bust. You would be in the clear.

Bloodyhamabeads · 15/02/2021 08:45

Are you buying a more expensive house? Because it’s all very well getting the 10% from your buyer for no completion, but would you also have to forfeit completion on the one you were buying? If a more expensive house, a higher deposit?

GU24Mum · 15/02/2021 08:57

Hi OP, I'm assuming for these purposes that it's just you selling your house and no related transactions.

Except in unusual circumstances, the buyer's solicitor won't send the deposit before exchange but should send it at/shortly after exchange. That means different things to different firms but if you have concerns you should mention them to your solicitor and ask them not to accept a lower deposit percentage or that the funds are left with the buyer's solicitor and held to order. That's not in itself inherently risky but if you think there's a risk of breach, far better for your solicitor to control the funds.

If you're in a chain, that's a longer and more involved answer as although the position is the same between you and your buyer, you then have obligations up the chain.

Persipan · 15/02/2021 09:07

I am not normally a fan of exchanging and completing on the same day, but if you have concerns about the purchaser's liquidity between exchange and completion then in this case it might be something to consider. The downside obviously being that it might not happen at all, but at least then it's a clean break and you know where you stand.

Bells3032 · 15/02/2021 09:11

If the deposit is with the lawyers shouldn't be too hard but they'd have a least a week after completion date and then you'd have to serve them notice to complete

Ilikecurrybest · 15/02/2021 09:15

We had this situation with our sale recently and insisted on exchange/completion on same day for our sale which did the trick

KitchenFairy · 15/02/2021 09:25

Is there a time limit between exchange and completion? How will exchanging benefit you if he then drags it out for another 4 months? What if you are the ones who end up saying you are no longer willing to wait after you’ve exchanged, will you end up owing him money?

I would just tell him and his solicitors - the house is going back on the market by the end of this week, and if you haven’t exchanged and completed by 14th March we will be accepting another offer.

titchy · 15/02/2021 09:49

If he's closed a company (owing debts?) and reopened a Phoenix company he's dodgy as fuck. It sounds like the estate agents are trying to warn you tbh. And yes of course if completion is delayed you're the one stuck with a commitment to sell to him.

Original poster

CatAndHisKit · 16/02/2021 02:58

The completion date will be set of course, Kitchen ! Delayed, meaning mid to end-March, but definite.
I can not risk exhcange and completion on same day - I'm downsizing and need to book removals for packing over two days. Also I really can;t wait to have certainty anymore, hence exchange asap is better for me than both om same day but in a month (and may not happen).

Bells so when I realistically can yo uget the deposit funds? It it several weeks?

GU thanks - I will make sure it's with my soliitor and not a lower one, I thought there were set rules, but good to know it's up to me to insist on that. No chain currently, as I said, if I do miraculously find a house with no chain, then I'll be thinkong about it. Maybe haev different dates on that, just in case (exchange there after completing here).

Appreciate all the replies.

titch yes, it was my own research - agent did say he was flakey when he disappeared first time round, a dI did listen and house went back on the market - but after two days he got back in touch and ordered searches through solicitors, I thought that meant he was serious. He may well still want to buy but who knows when (and it is still an 'if' as I know he found issues with a few things - which he should have learned about at the start). So if the agent knows more, they should haevv told me when I got back with him, but I think they wer hopeful too.

OP posts:

Original poster

CatAndHisKit · 16/02/2021 03:00

*titchy

OP posts:

Flip